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    Capital Intensive and Labor Intensive

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    Foundations of Financial Management
    Block and Hirt -- Eleventh Edition

    Problem 5-7 Objective
    Create break-even charts

    Student Name:
    Course Name:
    Student ID:
    Course Number:

    Draw two break-even graphs-one for a conservative firm using labor-intensive production and another for a
    capital-intensive firm. Assuming these companies compete within the same industry and have identical sales,
    explain the impact of changes in sales volume on both firms' profits.

    Although no example is provided in the textbook problem, we suggest you use these assumptions to
    create an Excel line chart (break-even chart).

    Labor Capital
    Intensive Intensive
    Selling price $12.00 $12.00
    Variable cost per unit $8.00 $5.00
    Fixed costs $250,000 $300,000

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    Solution Summary

    The solution explains the breakeven even differences between labor intensive and capital intensive through the use a CVP graph.